Intervention on U.S. Bedroom Furniture Imports: Lessons and Challenges - Changyou Sun May 20, 2014
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Intervention on U.S. Bedroom Furniture Imports:
Lessons and Challenges
Changyou Sun
Associate Professor
Forest Resource Economics
Mississippi State University
May 20, 2014
1
Road Map
1 Wooden Bedroom Furniture Market
2 Project A: Intervention Analysis of Antidumping Investigation
3 Project B: Import Competition in the United States
4 Project C: Price Transmission between China and Vietnam
5 Project D: Global Growth in Bedroom Furniture Trade
6 Summary and Discussion
2
Wooden Bedroom Furniture Market
The total world trade of wooden bedroom furniture was US$2.91 billion
in 1997 only but reached $8.33 billion in 2012 (UN Comtrade, 2013).
China has become the leading exporter: $0.12 billion and 4% in 1997;
$3.02 billion (36%) in 2012.
USA has been the largest importer: $0.76 billion (26%) in 1997; $3.23
billion (39%) in 2012.
3A set: bed, chest, dresser, mirror, nightstand
Furniture sample
Furniture sample
Product classifications
Harmonized Tariff Schedule (HTS) Chapter 94
HTS 9403.50 “wooden furniture of a kind used in the bedroom”
Bed—HTS 9403.50.9040
Rail—HTS 9403.50.9080
Part—HTS 9403.90.7000
Mirror—HTS 7009.92.5000
7Antidumping against China: complaint
In the global wooden bedroom furniture market, there has been an
intense dispute between the leading importer and exporter (i.e., the
United States versus China).
The large amount of China’s exports has resulted in strong reaction
from domestic manufacturers in the United States.
The petitioners alleged that wooden bedroom furniture from China has
been dumped in the United States at less than fair value.
8Antidumping against China: market share
In 2002, 39% of the imported bedroom furniture by U.S. was from
China.
In 2002, 50% of the wooden bedroom furniture consumption in the
U.S. was met by domestic production.
33% of bedroom furniture imports from China over 2001–2003 were
imported by U.S. manufacturing firms.
9Antidumping against China: a 15-month investigation
In October 2003, a group of American furniture firms and labor unions
filed a petition with the International Trade Commission (ITC) and
Department of Commerce in the United States.
An affirmative decision was reached for the preliminary
less-than-fair-value determination in July 2004.
In December 2004, it was concluded that the furniture industry was
materially injured by wooden bedroom furniture imports from China.
Final antidumping duties ranging from 0.83% to 198.08% have been
imposed on individual Chinese firms since January 2005.
10Antidumping against China: the five-year review
In 2010, a five-year review concluded that revocation of the
antidumping duty order on wooden bedroom furniture from China
would be likely to lead to continuation or recurrence of material injury
to the industry in the United States within a foreseeable time.
The antidumping duties have been retained as the same since 2010.
11Research questions
Dumping is an economically harmful disease.
Antidumping is the medication.
Has the U.S. antidumping policy and trade intervention achieved its
goal?
In 2009, 22% of the wooden bedroom furniture consumption in the
U.S. was met by domestic production, which was a further decrease
from 50% in 2002.
12Project A: Intervention Analysis on the Investigation
Objective: to evaluate the impacts of the 2003 antidumping case on
bedroom furniture imports from China and other competing countries
Data: import values of four commodities; prices of two commodities;
China and six competing countries
Period: January 1997 to June 2008
13Monthly import values from China over 1997–2008
120
1 Value - Rail
100
2 Value - Bed 1
3 Value - Part
Import Value ($ Million)
4 Value - M irror
80
a Oct. 2003
b Jul. 2004
60
2
c Jan. 2005
40
3
20
4
a b c
0
1998 2000 2002 2004 2006 2008Monthly import prices from China over 1997–2008
180
25
160
20
Unit Price - Mirror ($/ cm2)
Unit Price - Bed ($/piece)
140
1 Price - Bed
15
1
120
2 Price - M irror
a Oct. 2003
100
b Jul. 2004
10
2
c Jan. 2005
80
5
60
a b c
1998 2000 2002 2004 2006 2008Empirical methods: intervention analysis
Intervention analysis and various statistical techniques related to
multiple interventions were employed.
Autoregressive integrated moving average (ARIMA) model
Three dummy variables:
1 D1 = 10/2003 investigation announcement
2 D2 = 07/2004 preliminary decision
3 D3 = 01/2005 duty imposition
Key formula: y = β1 D1 + β2 D2 + β3 D3 + ARIMA
16Sample autocorrelation function
SPACF (d=0, D=0)
SACF (d=0, D=0)
0.6
0.6
0.2
0.2
-0.2
-0.2
0 5 10 15 20 25 30 35 0 5 10 15 20 25 30 35
Time Lag Time Lag
0.1 0.2
0.2
SPACF (d=1, D=1)
SACF (d=1, D=1)
0.0
-0.1
-0.2
-0.3
-0.4
0 5 10 15 20 25 30 35 0 5 10 15 20 25 30 35
Time Lag Time LagEstimated impulse response weights
0.5
. Oct. 2003 . .
Jul. 2004 Jan. 2005
Impulse Response Weights ij
0.0
-0.5
Intervention I Intervention II Intervention III
(i = 1, j = 0, 1, ..., 8) (i = 2, j = 0, 1, ..., 5) (i = 3, j = 0, 1, ..., 14)
-1.0
0 1 2 3 4 5 6 7 8 0 1 2 3 4 5 0 1 2 3 4 5 6 7 8 9 11 13
Lag Index jResults: investigation and duty effects
The first major finding was that investigation effects on imports of all
the commodities from China were significant.
No duty effect was found on imports from China after the antidumping
duties have been formally implemented since January 2005.
19Results: positive trade diversion
Significant and positive trade diversion effects on six major competing
countries were discovered.
The magnitude of the diversion effect was less than the trade
depression effect on China.
20Project B: Import Competition in the United States
Objective: to assess the import competition among 7 countries
Method: static and dynamic Almost Ideal Demand System (AIDS)
Product: wooden beds, HTS 9403.50.9040
Data: import prices and quantities of wooden beds from 7 countries
Period: January 2001 to December 2008
AIDS model is “macro”; intervention analysis is “micro”.
21US import values and shares over 2001–2008
Total Expenditure ($ mil) 4. Malaysia (%)
125 10
100 8
75 6
50 4
2
1. China (%) 5. Canada (%)
60 16
50 12
40 8
4
30
2. Vietnam (%) 6. Brazil(%)
9
30
7
20
5
10
3
0
3. Indonesia (%) 7. Italy (%)
12
12
9
10
8 6
6 3
2002 2004 2006 2008 2002 2004 2006 2008AIDS Model
Static AIDS model
N K
mt
X X
wit = αi + βi ln + γij lnpjt + ϕik Dkt + uit
Pt∗ j=1 k=1
where
wit = import share for country i at period t
mt
ln = real total expenditure
Pt∗
lnpjt = price of beds for country j at period t
Dkt = investigation and duty dummy
Dynamic AIDS model = cointegration + error correction + static AIDS
23Results: limited overall effects
As a trade remedy instrument, the antidumping investigation against
China has limited effects in reducing the import growth of wooden
beds until 2008.
The effectiveness of this antidumping investigation is only temporary.
This is consistent with the continuous growth of total import value of
wooden beds by the United States between 2005 and 2008.
24Results: trade diversion and substitution
The trade diversion takes place from China to Vietnam, Indonesia, and
Brazil at the same time.
The imports among most countries can be substituted by each other,
except the wooden beds from Italy. Most cross-price elasticities are
inelastic with moderate magnitudes, implying that wooden beds from
these countries are far from perfect substitutes.
25Project C: Price transmission between China & Vietnam
Motivation: With a combined market share of more than 60%, China
and Vietnam have dominated the import market of the United States
in recent years.
Objective: to examine the dynamics between two import prices of
wooden beds from China and Vietnam
Product: wooden beds, HTS 9403.50.9040
Method: error correction model with nonlinear threshold cointegration
Data: monthly import prices of wooden beds for China and Vietnam
Period: January 2002 to January 2010
26Import values from China and Vietnam over 2002–2010
60
China
Monthly import value ($ million)
Vietnam
40
20
0
2002 2003 2004 2005 2006 2007 2008 2009 2010Import prices from China and Vietnam over 2002–2010
180
China
Monthly import price ($/piece)
Vietnam
160
140
120
100
2002 2003 2004 2005 2006 2007 2008 2009 2010Methods
At the beginning, linear cointegration analyses, including Johansen and
Engle-Granger two-step approaches, are applied to evaluate the
cointegration relationship.
Then the analysis is extended to nonlinear threshold cointegration.
In the end, an asymmetric error correction model with threshold
cointegration is utilized to analyze the short-term relationship.
29Results: China as a price leader
The import price of China has been fluctuated between $140 and $160
per piece, which is about 30% higher than the price of Vietnam.
Nonetheless, the monthly import value from Vietnam has passed that
from China since January 2009.
China has been the price leader of the market and its price has been
evolving more independently. China may lose its price leadership to
Vietnam over next several years if the current trade trend continues.
30Results: asymmetric price transmission
The transmission between the prices of China and Vietnam has been
asymmetric in both the long term and short term.
In the long term, positive deviations of the price spread between the
two countries take about 4 months to be fully digested, while negative
deviations take less than 1.5 months.
These furniture firms are more sensitive and act more promptly when
price fluctuations reduce their profits.
31Project D: Global Growth in Bedroom Furniture Trade
Motivation: China is still exporting more bedroom furniture — $1.4
billion in 2005, $2.6 billion in 2010, $3.0 billion in 2012.
Objective: to evaluate the global trade competition of wooden
bedroom furniture
Method: AIDS model for 4 separate import markets (US, UK,
Australia, Japan); 9 exporters (e.g., China)
Product: HTS 9403.50 bedroom wooden furniture
Period: January 1997 and April 2013
32China and Vietnam in four markets over 1997–2013
China’s export value, price, and share over 1997–2013
Method: AIDS model
Static and dynamic AIDS model; cointegration
Three dummy variables:
antidumping investigation in 2003
duty collection since 2005
global financial crisis since 2008
35Results: depression on China and diversion to Vietnam
The antidumping duty has generated expected trade depression effects
on imports from China. China’s share: 48% in 2003 to 18% in 2012.
The trade remedy also produced positive diversion effects to Vietnam
and Malaysia in the long term. Vietnam’s share: 10% in 2005 to 40%
in 2012.
36Results: market share redistributed
The share of domestic shipments in total consumption in the United
States has been declining over time: 50%, 32%, 27%, 25%, 23%, 22%,
and 22% from 2003 to 2009.
After 8 years, it is safe to conclude that the trade intervention by the
United States did not help the domestic industrial firms in the United
States gain more market shares.
Instead, it has resulted in the market shares being redistributed among
supplying countries in the U.S. import market.
37Results: integration of the global market
The trade intervention by the United States generated trade diversion
effect on other import markets in the world.
China has gained large export growth in other import markets, e.g.,
the United Kingdom, Australia, and Japan.
38Summary and Discussion
It takes some time for a trade policy to generate some impacts on the
market.
Contracting, manufacturing, strategy changes, . . .
2003 complaint, 2005 imposition, 2010 five-year review, 2014 now, . . .
39Bilateral trade intervention
An antidumping policy for one country in an import market may not
be effective in protecting its domestic industry.
Substitute relations among products from different supplying countries
exist.
Globalization of the furniture industry is fast.
40Domestic furniture industry
To improve the competitiveness and market share in an increasingly
globalized furniture market, U.S. furniture manufacturers can learn
greatly from these successful strategies adopted by the competing
countries.
Vital strategies include:
enhanced mass customization,
more innovations,
clearer customer targets and pricing,
more intensive promotion by furniture associations, and
better government supports.
41. . . thank you . . .
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